Pub Date : 2020-12-01DOI: 10.1142/S2010495220500116
David E. Allen, M. McAleer
This paper presents a novel analysis of the global spread of the SARS-CoV-2 virus that causes the COVID-19 disease using the R package “nCov2019”, with an emphasis on the global spread and forecast...
{"title":"FLATTENING THE CURVE IN RISK MANAGEMENT OF COVID-19: DO LOCKDOWNS WORK?","authors":"David E. Allen, M. McAleer","doi":"10.1142/S2010495220500116","DOIUrl":"https://doi.org/10.1142/S2010495220500116","url":null,"abstract":"This paper presents a novel analysis of the global spread of the SARS-CoV-2 virus that causes the COVID-19 disease using the R package “nCov2019”, with an emphasis on the global spread and forecast...","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":"15 1","pages":"2050011"},"PeriodicalIF":2.0,"publicationDate":"2020-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42979416","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-12-01DOI: 10.1142/S2010495220500153
F. Mehrdoust, O. Samimi
This paper considers a class of Levy process namely the variance gamma (VG) process to offer a more realistic way to model the dynamics of the logarithm of stock prices. Then, we verify the uniquen...
{"title":"PRICING MULTI-ASSET AMERICAN OPTION WITH STOCHASTIC CORRELATION COEFFICIENT UNDER VARIANCE GAMMA ASSET PRICE DYNAMIC","authors":"F. Mehrdoust, O. Samimi","doi":"10.1142/S2010495220500153","DOIUrl":"https://doi.org/10.1142/S2010495220500153","url":null,"abstract":"This paper considers a class of Levy process namely the variance gamma (VG) process to offer a more realistic way to model the dynamics of the logarithm of stock prices. Then, we verify the uniquen...","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":"15 1","pages":"2050015"},"PeriodicalIF":2.0,"publicationDate":"2020-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42490019","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-11-27DOI: 10.1142/s2010495220500141
Marcelo de Oliveira Passos, M. Tessmann, Regis A. Ely, Daniel Uhr, Márcio Taceli Taveira
The large inflow of investment capital in critical periods sparked a debate about the extent to which these speculative bubbles affect asset volatility and how (and what extent) these volatilities are transmitted between them. In periods of greater uncertainty, commodity futures markets may receive and/or send two types of volatility spillovers: intergroup of assets and/or intragroup of assets. We tested for the period from March 3, 2000 to May 4, 2017, which of the two effects prevailed and in which group of assets was more intense. We concluded that the most relevant volatility transmission effects (measured by Diebold–Yilmaz indices) occurred intragroup of assets — corn, wheat, soy, oats and rice. These assets make up the main cluster of a commodities complex network. Thus, we detected and measured using network approach that the most significant effects was over the years of the Great Recession (2007–2009) and the peak of the European Sovereign Debt Crisis (2010–2012).
{"title":"EFFECTS OF VOLATILITY AMONG COMMODITIES IN THE LONG TERM: ANALYSIS OF A COMPLEX NETWORK","authors":"Marcelo de Oliveira Passos, M. Tessmann, Regis A. Ely, Daniel Uhr, Márcio Taceli Taveira","doi":"10.1142/s2010495220500141","DOIUrl":"https://doi.org/10.1142/s2010495220500141","url":null,"abstract":"The large inflow of investment capital in critical periods sparked a debate about the extent to which these speculative bubbles affect asset volatility and how (and what extent) these volatilities are transmitted between them. In periods of greater uncertainty, commodity futures markets may receive and/or send two types of volatility spillovers: intergroup of assets and/or intragroup of assets. We tested for the period from March 3, 2000 to May 4, 2017, which of the two effects prevailed and in which group of assets was more intense. We concluded that the most relevant volatility transmission effects (measured by Diebold–Yilmaz indices) occurred intragroup of assets — corn, wheat, soy, oats and rice. These assets make up the main cluster of a commodities complex network. Thus, we detected and measured using network approach that the most significant effects was over the years of the Great Recession (2007–2009) and the peak of the European Sovereign Debt Crisis (2010–2012).","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":"1 1","pages":"2050014"},"PeriodicalIF":2.0,"publicationDate":"2020-11-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49506821","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-09-01DOI: 10.1142/s2010495220500128
Yong-Chin Liu, Hsiang-Ju Chen, W. Hsu
This study examines whether the investment behavior of securities dealers is consistent with the predictions of the house money and break-even effects. Using the stock portfolios, dealers hold in Taiwan from 1996 to 2013 as a sample, we test the relationship between trading gains/losses and subsequent changes in portfolio risk. The results show that only gains with low risks, not all gaining situations, cause subsequent risk preferences, and regardless of the size of the trading loss, there is not a significant change in subsequent risk. Controlling dealers’ characteristics, industry competition, and the stock market condition, the evidence shows that the house money effect on dealer behavior exists after earning low-risk profits and does not support the break-even effect. These results are qualitatively unchanged after robustness checks that primarily exclude dealer overconfidence effect and ensure that the risk-taking behavior under low risks results in a decrease in gains and thus not a rational behavior.
{"title":"PRIOR TRADING OUTCOMES AND SUBSEQUENT PORTFOLIO RISKS: USING SECURITIES DEALER IN TAIWAN AS AN EXAMPLE","authors":"Yong-Chin Liu, Hsiang-Ju Chen, W. Hsu","doi":"10.1142/s2010495220500128","DOIUrl":"https://doi.org/10.1142/s2010495220500128","url":null,"abstract":"This study examines whether the investment behavior of securities dealers is consistent with the predictions of the house money and break-even effects. Using the stock portfolios, dealers hold in Taiwan from 1996 to 2013 as a sample, we test the relationship between trading gains/losses and subsequent changes in portfolio risk. The results show that only gains with low risks, not all gaining situations, cause subsequent risk preferences, and regardless of the size of the trading loss, there is not a significant change in subsequent risk. Controlling dealers’ characteristics, industry competition, and the stock market condition, the evidence shows that the house money effect on dealer behavior exists after earning low-risk profits and does not support the break-even effect. These results are qualitatively unchanged after robustness checks that primarily exclude dealer overconfidence effect and ensure that the risk-taking behavior under low risks results in a decrease in gains and thus not a rational behavior.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":"15 1","pages":"2050012"},"PeriodicalIF":2.0,"publicationDate":"2020-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41822327","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-09-01DOI: 10.1142/S2010495220500104
Nguyen Minh Ha, B. Ngoc, M. McAleer
The paper investigates the impact of financial integration and energy consumption on economic growth in Vietnam during the period 1986–2017. By applying the Autoregressive Distributed Lag ARDL) approach proposed by Pesaran et al. [Pesaran, MH, Y Shin and RJ Smith (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326.] and the bounds cointegration test, the empirical results show the existence of long-term cointegration among all the variables, and that an increase in financial integration leads to an increase in economic growth in the long run. There is a positive impact of energy consumption on growth in both the short run and long run. The causality test of Toda and Yamamoto [Toda, HY and T Yamamoto (1995). Statistical inference in vector autoregressions with possibly integrated processes. Journal of Econometrics, 66(1–2), 225–250.] confirm that there is bi-directional causality between the pairs, financial integration and economic growth, and energy consumption and growth, which support the feedback hypothesis. However, there is only uni-directional causality from energy consumption to financial integration. The empirical results should be of major empirical importance for public policy decision-makers to plan sustainable development goals for Vietnam.
{"title":"FINANCIAL INTEGRATION, ENERGY CONSUMPTION AND ECONOMIC GROWTH IN VIETNAM","authors":"Nguyen Minh Ha, B. Ngoc, M. McAleer","doi":"10.1142/S2010495220500104","DOIUrl":"https://doi.org/10.1142/S2010495220500104","url":null,"abstract":"The paper investigates the impact of financial integration and energy consumption on economic growth in Vietnam during the period 1986–2017. By applying the Autoregressive Distributed Lag ARDL) approach proposed by Pesaran et al. [Pesaran, MH, Y Shin and RJ Smith (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326.] and the bounds cointegration test, the empirical results show the existence of long-term cointegration among all the variables, and that an increase in financial integration leads to an increase in economic growth in the long run. There is a positive impact of energy consumption on growth in both the short run and long run. The causality test of Toda and Yamamoto [Toda, HY and T Yamamoto (1995). Statistical inference in vector autoregressions with possibly integrated processes. Journal of Econometrics, 66(1–2), 225–250.] confirm that there is bi-directional causality between the pairs, financial integration and economic growth, and energy consumption and growth, which support the feedback hypothesis. However, there is only uni-directional causality from energy consumption to financial integration. The empirical results should be of major empirical importance for public policy decision-makers to plan sustainable development goals for Vietnam.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":"15 1","pages":"2050010"},"PeriodicalIF":2.0,"publicationDate":"2020-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47122703","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-06-17DOI: 10.1142/s2010495220500062
Ryle S. Perera, Kimitoshi Sato
In this paper, we analyze the impact of savings withdrawals on a bank’s capital holdings under Basel III capital regulation. We examine the interplay between savings withdrawals and the investment strategies of a bank, by extending the classical mean–variance paradigm to investigate the bankers optimal investment strategy. We solve this via an optimization problem under a mean–variance paradigm, subject to a quadratic optimization function which incorporates a running penalization cost alongside the terminal condition. By solving the Hamilton–Jacobi–Bellman (HJB) equation, we derive the closed-form expressions for the value function as well as the banker’s optimal investment strategies. Our study provides a novel insight into the way banks allocate their capital holdings by showing that in the presence of savings withdrawals, banks will increase their risk-free asset holdings to hedge against the forthcoming deposit withdrawals whilst facing short-selling constraints. Moreover, we show that if the savings depositors of the bank are more stock-active, an economic expansion will imply a greater reduction in bank savings. As a result, the banker will reduce his/her loan portfolio and will depend on high stock returns with short-selling constraints to conform to Basel III capital regulation.
{"title":"THE IMPACT OF SAVINGS WITHDRAWALS ON A BANKER’S CAPITAL HOLDINGS SUBJECT TO BASEL III ACCORD","authors":"Ryle S. Perera, Kimitoshi Sato","doi":"10.1142/s2010495220500062","DOIUrl":"https://doi.org/10.1142/s2010495220500062","url":null,"abstract":"In this paper, we analyze the impact of savings withdrawals on a bank’s capital holdings under Basel III capital regulation. We examine the interplay between savings withdrawals and the investment strategies of a bank, by extending the classical mean–variance paradigm to investigate the bankers optimal investment strategy. We solve this via an optimization problem under a mean–variance paradigm, subject to a quadratic optimization function which incorporates a running penalization cost alongside the terminal condition. By solving the Hamilton–Jacobi–Bellman (HJB) equation, we derive the closed-form expressions for the value function as well as the banker’s optimal investment strategies. Our study provides a novel insight into the way banks allocate their capital holdings by showing that in the presence of savings withdrawals, banks will increase their risk-free asset holdings to hedge against the forthcoming deposit withdrawals whilst facing short-selling constraints. Moreover, we show that if the savings depositors of the bank are more stock-active, an economic expansion will imply a greater reduction in bank savings. As a result, the banker will reduce his/her loan portfolio and will depend on high stock returns with short-selling constraints to conform to Basel III capital regulation.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2020-06-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49596309","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-06-16DOI: 10.1142/s2010495220500074
Aziz Issaka
In this paper, we consider price weighted-volatility swap and price weighted-variance swap. The underlying asset considered in this paper is assumed to follow a general stochastic differential equa...
本文考虑了价格加权波动互换和价格加权方差互换。假设本文考虑的标的资产遵循一般的随机微分方程。
{"title":"VALUATION, HEDGING, AND BOUNDS OF SWAPS UNDER MULTI-FACTOR BNS-TYPE STOCHASTIC VOLATILITY MODELS","authors":"Aziz Issaka","doi":"10.1142/s2010495220500074","DOIUrl":"https://doi.org/10.1142/s2010495220500074","url":null,"abstract":"In this paper, we consider price weighted-volatility swap and price weighted-variance swap. The underlying asset considered in this paper is assumed to follow a general stochastic differential equa...","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":"15 1","pages":"2050007"},"PeriodicalIF":2.0,"publicationDate":"2020-06-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1142/s2010495220500074","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47023004","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-06-01DOI: 10.1142/s2010495220500086
Moawia Alghalith, Ricardo Lalloo
This paper is the first to consider hedging under price, output and basis risks using a general framework. In doing so, it provides significant empirical results pertaining to the US.
{"title":"HEDGING UNDER PRICE, OUTPUT AND BASIS RISKS: EMPIRICAL ANALYSIS","authors":"Moawia Alghalith, Ricardo Lalloo","doi":"10.1142/s2010495220500086","DOIUrl":"https://doi.org/10.1142/s2010495220500086","url":null,"abstract":"This paper is the first to consider hedging under price, output and basis risks using a general framework. In doing so, it provides significant empirical results pertaining to the US.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":"1 1","pages":""},"PeriodicalIF":2.0,"publicationDate":"2020-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41488075","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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